Slow-Walking Inflation-Rate Hikes Hurt Poor




Hikes Hurt Poor

By DAN MASKIN • CEO, Opportunities For Otsego

Mollie Orshansky was an economist at the Social Security Administration in the 1960s. At the time, she proposed Official Poverty Thresholds (OPM) based on the cost of food. She calculated that any family earning less than three times the USDA estimate for the subsistence food budget was  considered poor. That’s how the poverty guidelines began.

These thresholds have remained in place for the last 50 years and are virtually unchanged other than cost-of-living adjustments. Right now the OPM guidelines count as poor a household of three earning less than $20,212 per year (Katherine Gallagher Robbins, “Talk Poverty,” May 8, 2019).

The problem is that the OPM is artificial at best. It does not take into account the many variations that exist in other economic situations. For example, the cost of living in Decatur is different than the cost of living in Cooperstown.

Not only is the OPM too low, it skews people’s understanding of poverty. The “Talk Poverty” article goes on to say that 70 percent of voters have confronted a serious hardship in the last year. The point being that financial hardships are a reality for families earning even twice the OPM threshold.

But now, the White House is proposing to make those thresholds even lower. The cost-of-living adjustments for the current OPM is based on the Consumer Price Index, which tracks the changes in price for a set group of consumer goods. By making slow incremental changes to slow the rate
of inflation, the poor, who are already living paycheck to paycheck, are going to have to struggle even harder.

The White House Office of Management & Budget is asking for comment on these proposed regulatory changes. Opportunities for Otsego will, of course, be submitting its own. And, the National Community Action Foundation as well as the National Community Action Partnership are mobilizing the 1,100 community action agencies around the country to make comments as well.

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